Brian Hourigan, a New York-based real estate executive, prides himself on having a portfolio of properties with modest but predictable returns. Still, as cryptocurrencies rallied last fall, the 38-year-old made an uncharacteristically risky bet.
Hourigan invested $20,000 in bitcoin and ether in October in hopes that it would turbocharge his plan to buy an apartment. His inspiration: Adam Gharmani, a close friend and crypto entrepreneur who was slaying in digital tokens and excited about the sector for years.
“I allow Adam’s longstanding and particularly rapid enthusiasm about the state of crypto to have a major impact on my decision,” said Hourigan, whose cryptocurrency investments this year have been more than enough of their value as a digital asset. About half is lost.
The crypto is no stranger to busts, having suffered four major downtrends since late 2017. But with the token gaining more mainstream appeal during last year’s bull market, the pain of the latest crash is being felt by a far greater number of individuals – many of whom have been caught by the crypto bug from those closest to them. It’s sparking some awkward conversations at dinner parties and family gatherings around the world.
“Bryan likes to give me mistimed investment advice at parties,” said Gharmani, 39, who manages the charity NFT community Untamed Elephants. “At their recent Fourth of July event, I was the object of a joke about my genius crypto strategies.”
Since bitcoin’s peak in November, the cryptocurrency has lost nearly $2 trillion in market cap. Several crypto companies as well as a major hedge fund exploded in the past two months causing billions in losses. The psychological toll of peaking is compounded by the knowledge that many crypto boosters – friends or otherwise – have made decent profits this year even after almost 50% of bitcoin. A person who bought the token just two years ago would have more than doubled his money. Investing at the bottom of the 2018 bear market would have yielded more than 600% returns.
Personal relationships were a major driver behind the influx of new money into crypto. Three-quarters of investors under the age of 40 said that competition with friends, family and acquaintances drives them to invest in high-risk products such as cryptocurrencies, according to a survey published by the UK financial regulator in October. is shown.
“Many of my clients were originally introduced to crypto through a family member, friend or colleague,” said Aaron Sternlich, a New York-based therapist who specializes in treating crypto-trading addiction. “His family member or friend may have acted as a catalyst for his investment decisions, but were not necessarily the only force behind his involvement in investing money in crypto.”
For most of their existence as an asset class, buying digital tokens was not as easy as opening a stock trading account with your bank. Companies such as PayPal Inc., Block Inc., Revolut, and Robinhood Markets Inc. began letting customers make digital-coin purchases on their platforms in recent years, easing the way for millions of investors into crypto.
According to data from Cryptoquant, the 30-day average number of active bitcoin addresses increased by 52% from March 2020 to around 1.2 million in April 2021. As the cryptocurrency declined this year, the number of addresses fell below 900,000.
‘Every crypto-bro cliché’
“There was widespread speculative enthusiasm in the last rally – no matter what, you can’t go wrong,” said crypto advisor Colin Platt. “It wasn’t just about following friends and family, it was about seeing friends and family doing well and thinking that everything would be fine until the music stopped for everyone. “
Eric Sumner, a 30-year-old public relations manager in Tel Aviv, said he persuaded his friend Andrew Dean, an engineer, to invest in bitcoin, citing “every crypto-bro cliché in the book”.
“Think how few people used the Internet in the ’90s,” Sumner said as he told Deen. “‘That was literally less than 10% of the entire global population. If bitcoin and ether come even closer to the global 15% in the coming years, we are millionaires.'”
Not that things panned out. Deen, who lives in Silver Spring, Maryland, invested $4,000 in Bitcoin, Cardano, Ether and Dogecoin between February and July 2021. He estimates that his crypto portfolio is down 80% to 85%.
“Eric’s quote got me thinking, ‘If I don’t go to the ground floor, I might lose my opportunity,'” Deen said. “The prospect of getting rich quick was a great lure.”
Rush at Risk
Crypto was one of the main beneficiaries in early 2020 as the COVID-19 outbreak prompted central banks and governments to offer unprecedented incentives. Ultra-easy liquidity, coupled with savings by government handouts and lower spending on travel, has prompted a rush into riskier assets that lasted till the end of 2021.
This came as consumer prices emerged as a major concern for central banks after more than a decade of sluggishness. As soon as the Federal Reserve began to pivot, so did crypto investors: after nearing $69,000 in early November, bitcoin and the broader crypto complex began to decline sharply.
Anastasia Chambers, a 31-year-old student living in Carson City, Nevada, gave her brother Alexander $1,000 to invest in crypto in March 2021. His portfolio is down about 60%. His mother, Claudia, a 63-year-old retired legal secretary living in Reno, gave Alexander $5,000 to put in digital tokens. Its investments have outperformed, falling nearly 15%.
Alexander, who works as a content strategist at decentralized finance project Geode Finance, takes comfort in not being pressured to invest more than he can afford to lose his sister and mother.
“I live in Nevada, so I’m used to people being careless with their money,” Alexander said. “In some ways, investing in crypto is not much different than going to a casino for a night, especially for people who think they will beat the odds. You have to understand what you are investing in, and then Also, there’s no assurance that you’re going to come out on top.”